The Bank of Canada (BoC) is likely to deliver its next 25bp rate cut today, at least according to the vast majority of economists surveyed by Bloomberg (including us) , Commerzbank’s FX Analyst Michael Pfister notes.

CAD is likely to come under some pressure

“There are good reasons for this view. For one thing, inflation has continued to ease recently. Seasonally adjusted monthly rates of change in the headline rate have been in line with the inflation target on average over the past eleven months.”

“On the other hand, the labour market has weakened further recently. As the labour force continues to grow strongly, the unemployment rate is also rising. In short, the interest rate level is clearly too restrictive at present, which allows for further easing.”

“The most important factor for the CAD is likely to be the extent to which further rate cuts are signalled. Given the latest data, a 25bp cut is likely to be the base case for each of the upcoming meetings. Depending on how much room the BoC sees for (even) more significant rate cuts, the CAD is likely to come under more or less pressure today.”